Incidents:
On April 18, 2024, Anning Co., Ltd. released its 2023 annual report and 2024 quarterly report: in 2023, it achieved operating income of 1,856 million yuan, a year-on-year decrease of 7.0%; realized net profit of 936 million yuan, a year-on-year decrease of 14.5%; realized net profit without return to mother of 933 million yuan, a year-on-year decrease of 14.6%; gross sales margin of 66.6%, a decrease of 4.2 pcts year-on-year, and a net sales margin of 50.5%, a year-on-year decrease of 4.4 pcts; net cash flow from operating activities was 892 million yuan.
In the 2023Q4 quarter, the company achieved operating income of 479 million yuan, -1.4% year-on-year, and -9.9%; realized net profit of 225 million yuan, +0.4% year-on-year, and -16% month-on-month; net profit after deducting non-return to mother of 231 million yuan; and net cash flow from operating activities of -021 million yuan. Gross sales margin was 66.5%, -0.9 pct year over month, -1.5 pct month on month; net sales margin was 46.9%, up 0.8 pct year on year, down 3.5 pct month on month.
With 2024Q1, the company achieved revenue of 445 million yuan, a year-on-year net profit of +0.03 billion yuan, a net profit of 230 million yuan, -0.57% year-on-year, and realized net profit of 230 million yuan without deduction to mother, or +0.80% year-on-year.
Investment highlights:
The price of titanium concentrate fluctuated at a high level. Net profit returned to mother in 2023 was slightly pressured. Domestic titanium dioxide production maintained a growing trend, and global titanium ore supply and demand showed a tight balance. At the same time, steel companies in Yunnan began purchasing vanadium-titanium-iron concentrate, and vanadium-titanium-iron concentrate prices entered an upward range in the second half of the year. In 2023, the company achieved operating income of 1,856 billion yuan, a year-on-year decrease of 7.0%; realized net profit of 936 million yuan, a year-on-year decrease of 14.5% and a year-on-year decrease of 158 million yuan. In 2023, the company's gross profit was 1,236 million yuan, year-on-year. In 2023, the net cash flow from the company's operating activities was 892 million yuan, -3.83% year-on-year. In 2023, the company sold 493 million tons of titanium concentrate, -3.90% year on year, the average sales price of titanium concentrate was 2,330 yuan/ton, -3.11%; vanadium-titanium-iron concentrate (61%) sales volume was 1.1044 million tons, -20.24% year over year, and the average sales price of vanadium-titanium-iron concentrate (61%) was 630 yuan/ton, +16.82% year on year.
In terms of period expenses, the company's sales expenses rate in 2023 was 0.15%, -0.01 pct year on year, 5.38%, year-on-year +0.47 pcts, R&D expenses rate 3.17%, year-on-year +0.11 pcts, financial expenses ratio -2.83%, and +0.02 pcts year-on-year.
The pattern of tight supply of titanium concentrate continues, and 2024Q1 contract liabilities increased month-on-month, and the increase in global titanium concentrate supply was limited in the short term. Judging from data released by the US Geological Survey (USGS), few major new resources have been discovered in the world in recent years. At the same time, iron titanite production has increased year by year, and the global ferrotitanium resource reserve survey data has continued to decline. Among them, iron titanite fell from 800 million tons in 2018 to 690 million tons in 2023, and rutile dropped from 62 million tons in 2018 to 55.5 million tons in 2023. There has been almost no new production capacity in foreign mines recently. Apart from individual domestic enterprises in Panxi, which have clear production capacity expansion plans, in the short term, the additional production capacity of domestic titanium concentrate is relatively limited, and at the same time, the cost of obtaining domestic titanium resources has increased.
With 2024Q1, the company achieved revenue of 445 million yuan, a year-on-year net profit of +0.03 billion yuan, a net profit of 230 million yuan, -0.57% year-on-year, and realized net profit of 230 million yuan without deduction to mother, or +0.80% year-on-year.
2024Q1, the company's contractual debt was 56 million yuan, an increase of 99.20% over the end of 2023, mainly due to an increase in the company's willingness to sign contracts.
The company's production target for 2024 has increased. It is optimistic that the company's annual performance will grow by the end of 2023. The total amount of ore owned by the company is about 253.4978 million tons, including 185.438 million tons of industrial-grade iron ore resources within the company's mining rights, 29.46% of TFE grade, 22.2816 million tons of associated TiO2, 12.02% TiO2 grade, and 502,200 tons of associated V2O5. It holds 68.059 million tons of low-grade iron ore. In terms of production, the company produced 494,700 tons of titanium concentrate in 2023, +0.33% year-on-year, and vanadium-titanium-magnetite production of 1.058,600 tons, or -18.86% year-on-year. According to the country's macroeconomic situation, the company plans to produce about 550,000 tons of titanium concentrate and 1.2 million tons of vanadium-titanium-iron concentrate (61%) in 2024, which is a significant increase over 2023 production, and is optimistic about the company's annual performance growth.
With the vertical layout of “titanium ore-titanium (alloy) materials”, the 60,000-ton energy-grade titanium project is progressing steadily in 2023. With the introduction of titanium alloy in high-end flagship models of major consumer electronics companies, the lightweight effect of titanium alloy frames is remarkable. The 3C sector is expected to continue to boost demand for titanium alloys, thereby increasing demand for titanium and titanium alloys. The company is committed to the strategic goal of “horizontal merger and acquisition resources, vertical extension of the industrial chain, and building an integrated mineral enterprise”. Currently, the pre-construction procedures for Anning Titanium to invest in the construction of the entire industry chain project with an annual output of 60,000 tons of energy-grade titanium (alloy) materials have been completed, and it has already entered the construction phase. The construction cycle is 2 years. According to the approval of the Sichuan Provincial Department of Ecology and Environment on the environmental impact report of Panzhihua Anning Titanium Technology Co., Ltd. with an annual output of 60,000 tons of energy-grade titanium (alloy) materials, the project construction mainly includes the construction of a 1.61 million tons/year high titanium slag production line, a 263,000 tons/year molten salt titanium tetrachloride production line, a 66,000 tons/year titanium sponge titanium alloy production line, 1 60,000 tons/year titanium alloy ingot production line, and 1 1,000 tons/year titanium powder production line. According to the company's estimates, the project is expected to achieve an average annual sales revenue of 5.689 billion yuan and an average annual net profit of 1,796 billion yuan after delivery.
Profit forecasts and investment ratings estimate that the company's 2024-2026 revenue will be 21.34 billion, 23.41 billion yuan, and 3.152 billion yuan, respectively, and net profit to mother will be 11.10, 11.52, and 1,369 billion yuan respectively. The current stock price corresponds to 12, 11, and 9 times PE, respectively. The company is an important domestic titanium concentrate supplier and leading enterprise, and beneficiation technical indicators such as titanium recovery rate have always been in a leading position in the industry, covered for the first time, giving a “buy” rating.
Risks suggest that the progress of new production capacity construction falls short of expectations, the contribution performance of new production capacity falls short of expectations, fluctuations in raw material prices, changes in environmental protection policies, and a sharp decline in the economy.